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29.
Tourism Ac5vity Licenses
• Propor5on of licences is reserved for community
owner/operators with equity par5cipa5on – equity
par5cipa5on dependent on nature of ac5vity & risk
proﬁle (usually between 60% and 70%)
• Currently 5 license holders in place

30.
PPPs
• Insourcing vs Outsourcing – should state money
be used to fund tourism given the inherent risks
• PPP framework
– risk transfer from state to private sector
– Guaranteed income stream to the state
– Community beneﬁts
– Environmental prac5ce
– Challenges that must be overcome to increase the
appeal of the transac5ons

31.
Regular Tourism Investments v Protected-area PPP
A regular tourist-accommodation
investment
A tourist-accommodation PPP in a
protected area
Capital growth:
The investor is able to sell the
property at a value that generally
exceeds the initial investment.
There is no capital growth. The facility
automatically reverts to the state without
compensation for the improvements
effected by the investor. At best, the
outgoing Private Party may recoup part
of the value of any movables taken over
by the new operator.
Collateral for debt financing:
The property can serve as collateral
for debt finance, even in the case
where the investment is on leasehold
property.
Collateral for debt financing is limited to
the investor’s rights under the PPP
agreement, which in financial terms, are
very limited. The investor would have to
encumber other assets to secure
finance. This is obviously unattractive to
investors, given that the PPP bears a
much higher risk than other non-PPP
tourism investments

32.
Regular Tourism Investments v Protected-area PPP
A regular tourist-accommodation
investment
A tourist-accommodation PPP in a
protected area
Risk:
The investor assumes the full
operational risk, including the risk of
bankruptcy. However the investor
may sell the project at any time to
mitigate losses or avert bankruptcy. If
further capital has to be injected into
the project, it may be recovered
through future profits and/or capital
appreciation.
The investor assumes the full operational
risk, including the risk of bankruptcy. It
has no option but to continue to operate
the project irrespective of the losses
being and its prospects of recovery. If
further capital has to be injected into the
project, it may never be recouped since
the life of the project is finite and there is
no capital appreciation.
Finance for land claimants &
traditional councils ("mandatory
partners"):
The investor is not required to raise
or underwrite any mandatory
partner’s share of the investment.
Protected areas are required to create
benefits for mandatory partners in the
form of equity amongst other things.
Since the mandatory partners have little
or no capital or assets, the primary
investor must underwrite or guarantee
the mandatory partner’s equity and share
of debt finance, resulting in a
disproportionate risk vis-à-vis return on
investment.

33.
Regular Tourism Investments v Protected-area PPP
A regular tourist-accommodation
investment
A tourist-accommodation PPP in a
protected area
Capital expenditure & operating costs:
Capex and operating costs are not
impacted by environmental and related
factors typical of protected areas.
Capex and operational costs are
appreciably higher in response to
environmental strictures. For example,
construction costs are higher because
building takes place in remote and/or
inaccessible areas; waste must be
removed from the Park; specialised plant
must be installed to deal with sewage; etc.
Target market:
The investment project typically has
access to a variety of markets (leisure,
business, etc), enabling it to diversify
its business risk.
The investment project is reliant
exclusively on the leisure market, which is
notoriously fickle and subject to vagaries
beyond the investor’s control.
In many cases, due to the environmental
strictures the projects are small resulting in
high rack rates to ensure their viability.
This is the more vulnerable segment of the
tourism market during recessionary cycles.

37.
PPP Process
• TAII(a): approval of procurement
documenta5on
– Term related to the projected capital investment
and period to ensure a return
– Period circumscribed by na5onal treasury
– PPP fee based on project viability and to cover the
costs of management of the contract and give a
return to the park; payment holiday for EIA period
– Guarantees
– Evalua5on & scoring
• TAII(b) – approval of the adjudica5on
outcome

38.
PPP Process
• TAIII: approval of the contract and
management plan for managing the PPP
• For ac5vity licenses there is discre5on in the
toolkit – process and documenta5on same as
PPP excludes the treasury approval process